State may pay more if banks fail stress test

The State could end up paying more for the Irish banks if they fail the stress test next year as the bailout fund, the ESM, is ruling itself out and bailing-in the shareholders has become more acceptable.

Head of the ESM, Klaus Regling, said in an interview that the fund could directly lend to banks in the future, but only when banks have been under the supervision of the European Central Bank for some time.

He ruled out the fund buying the Irish State’s shares in the banks, Allied Irish Bank and Irish Permanent. “Member states of the euro area have said that will be either difficult or impossible”, Mr Regling told the Wall Street Journal.